Canada's canola harvest may not turn out to have been as weak as currently estimated, officials said, even while raising their price forecast for the oilseed, as well as for barley.
AAFC, Canada's farm ministry, acknowledged the weakened prospects for the domestic canola harvest revealed in a grower survey released late last month, which put the harvest at 18.2m tonnes - some 400,000 tonnes lower than previously expected, and down 1.4m tonnes year on year.
The ministry - pegging the Canadian canola yield at 2.03 tonnes per hectare, down 14.3% year on year - flagged the setback "from the drought across southern Saskatchewan and parts of southern Alberta", two of the three key Prairies producing provinces.
Indeed, the dryness in parts of the Prairies, coupled with undue wetness in parts of eastern Canada had "played a significant role" in leaving the country on course for a 10% drop in output of major crops in 2017-18, to a below-average 83.8m tonnes.
However, AAFC added that the producer survey was taken, in late July, at a time when Prairies "drought was at its most intense.
"Temperatures cooled off for August.
"This creates the possibility that estimates yields may be revised upwards" in further market surveys.
Nonetheless, the ministry nudged higher, to Can$510-550 a tonne, from Can$500-540 a tonne, its forecast for average prices of the oilseed in 2017-18, as measured in Vancouver, flagging the prospect of weaker supplies in both major exporting countries, Canada and Australia.
World supplies of vegetable oil produced from canola (or peer rapeseed), the key source of value in the oilseed, "are projected to remain tight in 2017-18, as most of the expected rise in production occurs in the US and India" - both countries being major importers.
"Combined with an expected expansion of US biodiesel production," a major use for rapeseed oil, "the tight world canola-rapeseed oil situation will support canola-rapeseed prices worldwide, and allow the crop to enjoy an above-normal premium to soybeans."
The comments came as the ministry edged higher too, by $5 a tonne to $185-215 a tonne, its forecast for barley values, as measured by the price for feed supplies in Lethbridge in southern Alberta – "essentially in the region of the Prairies which has been most affected by dry conditions".
Pressure on values "will come" as barley supplies mount from less drought-affected areas from further north.
Still, the ministry noted support to values from "tighter" world markets for both feed and malting supplies, with overall global barley stocks forecast by the US Department of Agriculture ending 2017-18 at 24-year low of 18.6m tonnes.
"Spot malting barley prices on the Prairies have been 5-10% higher than last crop year, mirroring a similar increase in world feed and malt prices."
By Mike Verdin